Explained: The Coal Logistics Plan and Policy and why India needs it

Until now, the railways have designated 500 trains to carry coal, which is to fire about 208 GW, or 48 percent, of India’s installed power generation capacity.

The Indian government released the Coal Logistics Plan and Policy on February 29, which is aimed at ramping up coal supplies, especially to power generation plants.

Coal logistics, which refers to the carriage of coal from the mines to their destinations, has been a perennial challenge in India, especially in the summer when power generation plants struggle with dwindling coal stocks amid increasing demand for electricity. Often, coal transportation has been a constraint and the railways had to make special arrangements to avoid supply disruptions.

The objective of the policy is to make coal logistics cheaper, faster and cleaner, while including aspects such as storage, and the loading and unloading of coal for delivery to power plants, steel manufacturing units, cement factories, and washeries.

Why did India need a Coal Logistics Policy?

India’s power demand is growing exponentially and at least 70 percent of the electricity demand is met by coal-fired power plants. Apart from the power sector, which is termed the regulated sector, industries such as steel and cement (non-regulated sectors) are also growing and in need of more coal.

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As a result, coal production has been ramped up by 12.1 percent to 880.72 million tonnes till February of FY24 from 785.39 million tonnes in FY23. As per the policy, with energy demand set to soar, coal consumption in India is projected to rise to 1.5 billion tonnes by 2030 from 980 million tonnes, necessitating efficient logistics.

Although coal production is increasing, supply remains constrained because logistics or coal transportation remains the biggest challenge. Roadways are not as fast as the railways, which have become heavily congested at major nodal points.

India’s coal reserves are concentrated in the eastern and central parts of the country. The major coal producing states are Odisha, Chhattisgarh and Jharkhand, along with parts of Madhya Pradesh, and they account for 75 percent of domestic raw coal dispatches in India. Given the congestion of the railway network, dedicated coal transportation corridors are required to ensure timely supplies.

Also, the manual movement of coal from the mine to the siding station or the washeries adds to the delay, which is why building a robust and mostly automated first-mile connectivity network becomes essential.

How will the Coal Logistics Policy solve the problem?

The policy talks about building dedicated railway corridors for coal transportation and the use of multi-modal transport involving conveyor belts, merry-go-round (MGR) trains, rail, and inland and coastal waterways, including rail-sea-rail routes, in an optimal manner. While these multi-modal transport options already exist, the policy attempts to push it and streamline it.

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The policy aims to boost the share of railways in coal transportation to over 87 percent by FY30. It proposes a shift towards a railway-based system in first-mile connectivity (FMC) projects, aiming for a 14 percent reduction in rail logistic costs and annual cost savings of Rs 21,000 crore.

The targets include ensuring mechanised loading/handling and evacuation of 90 percent of the coal produced through first-mile connectivity by FY30, completion of coal PSU-funded rail connectivity projects by FY27, establishment of a data-driven ‘Decision Support System’ to monitor the components of the coal logistics ecosystem and the development of a dashboard for tracking and analytics.

What are the projects being considered?

Across India’s major coal-producing triangle of Odisha-Chhattisgarh-Jharkhand, the government is implementing eight railway projects that are funded by coal companies. Currently, four projects have been commissioned and one project (Tori-Shivpur) will be inaugurated soon.

Besides, coal companies have taken up 103 FMC projects of 1,051 million tonne capacity, incurring a cost of Rs 24,000 crore. Of this, 31 FMCs of 291 million tonnes have been completed.

The coal ministry launched 15 railway projects to address multimodal connectivity gaps. Five of these projects have been commissioned.

What are the challenges?

Lack of investments and delays in the construction of logistics infrastructure could be key challenges in realising the coal logistics plan.

Faster adoption of digital technology across all coal PSUs, the railways and waterways could also be a challenge.

The railways will have a crucial role to play as it will not only have to build new lines but also procure a large number of wagons.